Mortgage lending rockets 26 per cent in June

Written by Sam Jones on 28 July 2013.

We can report this week that mortgage lending has grown by 26 per cent to hit a five-year high of £15bn in June, Council of Mortgage Lenders figures show.

June's figures are even 2 per cent higher than the the record-breaking May which saw £14.7bn lent for the first time since October 2008.Significantly it is also 26 per cent higher than June 2012 when £11.9bn was lent in total.

Gross lending for the second quarter of 2013 was therefore an estimated £42bn. This represents a 24 per cent increase from the previous three months and is the highest quarterly estimate since Q4 2008. With cheap mortgage rates flooding the market it represents the biggest boost to UK housing since the banking crisis.

CML chief economist Bob Pannell says: “Improvements in the cost and availability of mortgage credit are underpinning a meaningful recovery in the housing market. In recent months, we have seen the strongest performance for mortgage lending since 2008. "However, although the pace of first-time buyer activity is approaching a quarter of a million per annum, it is worth bearing in mind that this is still barely half of activity rates a decade earlier, and so far below what might be considered normal levels."

Stronger economy

The change is down to a number of factors mainly driven by Government interventions to boost the housing market.Most significantly the funding for lending scheme provides cheap loans to banks which they must then pass on in the form of mortgages or business loans.

This scheme has boosted lending and cut rates dramatically as the figures highlight. As well as more lending and mortgage availability rates have hit their lowest rates in history.

As well as mortgage availability and affordability the other major obstacle to purchasing has been raising the right deposit.

The Government has also intervened here too with the ambitious Help to Buy scheme providing 5 per cent deposits to home buyers and movers.The first instalment of the scheme, in the form of Government funded equity loans, is underway while the next part will kick in next January. All these factors have driven the housing market out of its five-year slump with a bright future ahead in the next three years.

House prices are predicted to rise by most economic forecasters alongside a growing UK economy but interest rates are set to remain low.

Fixed rates will remain low as long as cheap money floods the system from Government intervention while standard variable rates and trackers will be low as long as the Bank of England holds interest rates.

It was more than four years ago when the Bank cut rates to 0.5 per cent and it has signalled they will stay as low for some time to come.

Lending boom

All these factors are pushing up mortgage lending but they are still not at the same levels as the boom years. Optimistic forecasters would expect £160bn worth of mortgage lending this year compared to a massive £360bn in 2007 at the height of the housing boom.

It shows the extent of the change in the UK mortgage market and signals that increases to lending may be significant but relatively low levels suggests it is sustainable.

Tough new mortgage rules have been introduced since the crash to ban self-certification loans, crack down on interest-only deals and bring in more income checks for borrowers.

Regulators will also take a dim view of 100 per cent mortgages, or even 125 per cent mortgages, seen before the crash.

Lending is rising and there are more mortgages available than at any time since 2008 so it is a reason to rejoice.

Speak to a mortgage broker and see if finally you can make that move you've been waiting for or get your foot on the first rung of the housing ladder.

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